The German Crack in Kyoto's Wall - Chancellor says Europe should not rush into enforcing Kyoto treaty if Russia fails to sign

By Carlo Stagnaro
Tech Central Station

04/06/2004


A new crack has appeared in Kyoto's wall.

German Chancellor Gerhard Schroeder said Europe should not rush into enforcing targets to curb greenhouse emissions if Russia fails to sign the Kyoto protocol. "We hope that Kyoto will be ratified, for example by Russia," told Schroeder. "But if that doesn't happen, it will distort competition at the expense of European and especially German economy."

In fact, according to DRI/WEFA estimates, under the Kyoto protocol the price of home heating could rise by 28 percent in Germany by 2010; gasoline and diesel prices would rise by 9 percent and 14 percent. GDP would shrink by 2.9 percent below the baseline forecasts, and employment would fall by 1.0 million jobs annually during the 2008-2012 budget period.

Clearly, the poorest segments of the German society would be more strongly impacted by emission reduction. While rich people may afford an increase in the price of energy (thus in the cost of living in general), the poor might find it hard to face higher prices. Mr. Schroeder comes from the left; therefore he is supposed to take into account the effect his policies would have on the poor.

Taking a stand against the climate treaty, Mr. Schroeder also broke the European unity on the issue. Actually Schroeder is not the first European leader who points out that the alleged benefits of Kyoto should be compared with its costs. Back in 2002, EU's Commissioner for Energy and Transport, Loyola de Palacio, noted that "energy in the EU is already expensive enough... We already have taxes on gasoline. Are we going to raise fuel taxes even more, knowing how much people like that?" Kyoto is not precisely an energy tax, but a reduction in greenhouse gases emissions (that is, energy consumption) may be pursued, all else being equal, only by increasing the price of energy -- that is, raising energy taxes or creating an artificial scarcity otherwise. After Russia's decision not to ratify Kyoto, Loyola de Palacio added that it makes no sense for Brussels to go on with emission reductions if Moscow doesn't follow that path.

Recently, Italian Minister of Environment Altero Matteoli made an attempt to obtain a joint declaration from his colleagues, that future emission reductions should depend on the treaty being ratified by Russia. And Paolo Togni, who is director of minister Matteoli's cabinet, pointed out that human contribution to global warming is negligible if compared with natural trends. The implication is that actions taken to mitigate warming by curbing anthropogenic emissions are ineffective to say the least.

Interestingly enough, European politicians (such as EU's Loyola de Palacio, Germany's Schroeder, and Italy's Matteoli) are reluctant to openly oppose Kyoto. They prefer to show how their decision is a consequence of someone else's decision, rather than the result of a cost/benefits analysis. In fact, they claim that they would favor Kyoto, but it would be ineffective without the participation of other developed countries (put aside the developing world). So, Italy and Germany will enforce Kyoto after Russia. But that is like to say, "We'll do it after a cold winter in Hell."

Russia has no intention to ratify Kyoto, because that would prevent the rapid economic growth President Putin has chosen as his own political goal. Putin's economic advisor, Andrej Illarionov, went even further and defined Kyoto as a "return of Gosplan."

"The proposed mechanism [to enforce Kyoto] would decrease quotas year by year," said Illarionov. "So it may be more correct to call it the return of the gulag... During the 20th century, Russia seriously suffered from another ideology that came from Europe," he told, referring to Marxism. And he defined as "kyotism" the ideology of climate control.

Until a couple of years ago, Kyoto was a matter of religion in Europe. Either you were in favor of it, or you were to be burned as a stars-and-striped traitor. Today things are much different. As the first commitment period (2008-2012) comes closer, and the costs of Kyoto become more real, European politicians are beginning to think that a costly, ineffective policy might result in fewer votes for them.

Kyoto's wall is full of cracks, and the fatal one may be caused by a German hammer. This would not be the first time a wall falls in Berlin.

Mr. Stagnaro is Free Market Environmentalism Director of the Turin-based think tank Istituto Bruno Leoni (www.brunoleoni.it) and a fellow of the Brussels-based think tank International Council for Capital Formation (www.iccfglobal.org).